introduction to operations and supply chain management · 2018. 1. 30. · lecture outline what...

Introduction to Operations andIntroduction to Operations andSupply Chain ManagementSupply Chain Management

Chapter 1Chapter 1

Copyright 2009 John Wiley & Sons, Inc.Copyright 2009 John Wiley & Sons, Inc.

Beni AsllaniBeni AsllaniUniversity of Tennessee at ChattanoogaUniversity of Tennessee at Chattanooga

Supply Chain ManagementSupply Chain Management

Operations Management - 6th EditionOperations Management - 6th Edition

Roberta Russell & Bernard W. Taylor, IIIRoberta Russell & Bernard W. Taylor, III

Lecture OutlineLecture Outline

�� What Operations and Supply Chain What Operations and Supply Chain Managers DoManagers Do

�� Operations FunctionOperations Function

Copyright 2009 John Wiley & Sons, Inc.Copyright 2009 John Wiley & Sons, Inc. 11--22

�� Operations FunctionOperations Function�� Evolution of Operations and Supply Evolution of Operations and Supply

Chain ManagementChain Management�� Globalization and CompetitivenessGlobalization and Competitiveness�� OperationsOperations�� Strategy and Organization of the TextStrategy and Organization of the Text�� Learning Objectives for This CourseLearning Objectives for This Course

What Operations and What Operations and Supply Chain Managers DoSupply Chain Managers Do

�� What is Operations Management?What is Operations Management?�� design, operation, and improvement of productive design, operation, and improvement of productive

systemssystems

�� What is Operations?What is Operations?


�� What is Operations?What is Operations?�� a function or system that transforms inputs into a function or system that transforms inputs into

outputs of greater valueoutputs of greater value

�� What is a Transformation Process?What is a Transformation Process?�� a series of activities along a a series of activities along a value chain value chain extending extending

from supplier to customerfrom supplier to customer

�� activities that do not add value are superfluous and activities that do not add value are superfluous and should be eliminatedshould be eliminated

�� Physical: Physical: as in manufacturing as in manufacturing operationsoperations

�� Locational: Locational: as in transportation or as in transportation or

Transformation ProcessTransformation Process


�� Locational: Locational: as in transportation or as in transportation or warehouse operationswarehouse operations

�� Exchange: Exchange: as in retail operationsas in retail operations

�� Physiological: Physiological: as in health careas in health care

�� Psychological: Psychological: as in entertainmentas in entertainment

�� Informational: Informational: as in communicationas in communication

INPUT

•MaterialOUTPUT

Operations as a Operations as a Transformation ProcessTransformation Process


•Material

•Machines

•Labor

•Management

•Capital

TRANSFORMATION

PROCESS

OUTPUT

•Goods

•Services

Feedback & RequirementsFeedback & Requirements

Operations FunctionOperations Function

�� OperationsOperations

�� MarketingMarketing

�� Finance and Finance and


�� Finance and Finance and AccountingAccounting

�� Human Human ResourcesResources

�� Outside Outside SuppliersSuppliers

How is Operations Relevant to my How is Operations Relevant to my Major?Major?

�� AccountingAccounting�� “As an auditor you must “As an auditor you must

understand the fundamentals of understand the fundamentals of operations management.”operations management.”


�� Information Information TechnologyTechnology

�� ManagementManagement

�� “IT is a tool, and there’s no “IT is a tool, and there’s no better place to apply it than in better place to apply it than in operations.” operations.”

�� “We use so many things you “We use so many things you learn in an operations classlearn in an operations class——scheduling, lean production, scheduling, lean production, theory of constraints, and tons theory of constraints, and tons of quality tools.”of quality tools.”

How is Operations Relevant to my How is Operations Relevant to my Major? (cont.)Major? (cont.)

�� EconomicsEconomics


�� “It’s all about processes. I live “It’s all about processes. I live by flowcharts and Pareto by flowcharts and Pareto analysis.”analysis.”

�� “How can you do a good job “How can you do a good job



�� FinanceFinance

�� “How can you do a good job “How can you do a good job marketing a product if you’re marketing a product if you’re unsure of its quality or unsure of its quality or delivery status?”delivery status?”

�� “Most of our capital “Most of our capital budgeting requests are from budgeting requests are from operations, and most of our operations, and most of our cost savings, too.”cost savings, too.”

Evolution of Operations and Evolution of Operations and Supply Chain ManagementSupply Chain Management

�� Craft productionCraft production�� process of handcrafting products or process of handcrafting products or

services for individual customersservices for individual customers

�� Division of laborDivision of labor


�� Division of laborDivision of labor�� dividing a job into a series of small tasks dividing a job into a series of small tasks

each performed by a different workereach performed by a different worker

�� Interchangeable partsInterchangeable parts�� standardization of parts initially as standardization of parts initially as

replacement parts; enabled mass replacement parts; enabled mass productionproduction

�� Scientific managementScientific management�� systematic analysis of work methodssystematic analysis of work methods

��

Evolution of Operations and Evolution of Operations and Supply Chain Management (cont.)Supply Chain Management (cont.)


�� Mass productionMass production�� highhigh--volume production of a volume production of a

standardized product for a mass marketstandardized product for a mass market

�� Lean productionLean production�� adaptation of mass production that adaptation of mass production that

prizes quality and flexibilityprizes quality and flexibility

Historical Events in Historical Events in Operations ManagementOperations Management

Era Events/Concepts Dates Originator

Industrial

Revolution

Steam engine 1769 James Watt

Division of labor 1776 Adam Smith


RevolutionInterchangeable parts 1790 Eli Whitney

Scientific

Management

Principles of scientific

management1911 Frederick W. Taylor

Time and motion studies 1911Frank and Lillian

Gilbreth

Activity scheduling chart 1912 Henry Gantt

Moving assembly line 1913 Henry Ford

Historical Events in Historical Events in Operations Management Operations Management (cont.)(cont.)

Era Events/Concepts Dates Originator

Human

Relations

Hawthorne studies 1930 Elton Mayo

Motivation theories

1940s Abraham Maslow

1950s Frederick Herzberg


Relations Motivation theories 1950s Frederick Herzberg

1960s Douglas McGregor

Operations

Research

Linear programming 1947 George Dantzig

Digital computer 1951 Remington Rand

Simulation, waiting

line theory, decision

theory, PERT/CPM

1950sOperations research

groups

MRP, EDI, EFT, CIM1960s,

1970s

Joseph Orlicky, IBM

and others


Era Events/Concepts Dates OriginatorJIT (just-in-time) 1970s Taiichi Ohno (Toyota)

TQM (total quality1980s

W. Edwards Deming,


Quality

Revolution

management)1980s

Joseph Juran

Strategy and

operations1980s

Wickham Skinner,

Robert Hayes

Business process

reengineering1990s

Michael Hammer,

James Champy

Six Sigma 1990s GE, Motorola


Era Events/Concepts Dates OriginatorInternet

Revolution

Internet, WWW, ERP,

supply chain management

1990s ARPANET, Tim

Berners-Lee SAP,

i2 Technologies,


i2 Technologies,

ORACLE

E-commerce 2000s Amazon, Yahoo,

eBay, Google, and

others

Globalization WTO, European Union,

and other trade

agreements, global supply

chains, outsourcing, BPO,

Services Science

1990s

2000s

Numerous countries

and companies

Evolution of Operations and Evolution of Operations and Supply Chain Management (cont.)Supply Chain Management (cont.)

�� Supply chain managementSupply chain management

�� management of the flow of information, products, and services across management of the flow of information, products, and services across

a network of customers, enterprises, and supply chain partnersa network of customers, enterprises, and supply chain partners


Globalization and Globalization and CompetitivenessCompetitiveness

�� Why “go global”?Why “go global”?

�� favorable costfavorable cost

�� access to international marketsaccess to international markets


�� access to international marketsaccess to international markets

�� response to changes in demandresponse to changes in demand

�� reliable sources of supplyreliable sources of supply

�� latest trends and technologieslatest trends and technologies

�� Increased globalizationIncreased globalization

�� results from the Internet and falling trade results from the Internet and falling trade

barriersbarriers

Globalization and Globalization and Competitiveness (cont.)Competitiveness (cont.)


Hourly Compensation Costs for Production WorkersHourly Compensation Costs for Production Workers

Source:Source: U.S. Bureau of Labor Statistics, 2005.U.S. Bureau of Labor Statistics, 2005.



World Population DistributionWorld Population Distribution

Source:Source: U.S. Census Bureau, 2006.U.S. Census Bureau, 2006.



Trade in Goods as % of GDPTrade in Goods as % of GDP

(sum of merchandise exports and imports divided by GDP, valued in U.S. dollars)(sum of merchandise exports and imports divided by GDP, valued in U.S. dollars)

Productivity and Productivity and CompetitivenessCompetitiveness

�� CompetitivenessCompetitiveness�� degree to which a nation can produce goods and degree to which a nation can produce goods and

services that meet the test of international services that meet the test of international marketsmarkets

�� ProductivityProductivity


�� ProductivityProductivity�� ratio of output to inputratio of output to input

�� OutputOutput�� sales made, products produced, customers sales made, products produced, customers

served, meals delivered, or calls answeredserved, meals delivered, or calls answered

�� InputInput�� labor hours, investment in equipment, material labor hours, investment in equipment, material

usage, or square footageusage, or square footage

Productivity and Productivity and Competitiveness (cont.)Competitiveness (cont.)


Measures of Productivity



Average Annual Growth Rates in Productivity, 1995Average Annual Growth Rates in Productivity, 1995--2005.2005.

Source: Source: Bureau of Labor Statistics. A Chartbook of Bureau of Labor Statistics. A Chartbook of

International Labor Comparisons. January 2007, p. 28.International Labor Comparisons. January 2007, p. 28.



Average Annual Growth Rates in Output and Input, 1995Average Annual Growth Rates in Output and Input, 1995--20052005

Source:Source: Bureau of Labor Statistics. A Chartbook of International Bureau of Labor Statistics. A Chartbook of International

Labor Comparisons, January 2007, p. 26.Labor Comparisons, January 2007, p. 26.

Dramatic Increase in

Output w/ Decrease in

Labor Hours

�� RetrenchingRetrenching

�� productivity is increasing, but both output and input productivity is increasing, but both output and input

decrease with input decreasing at a faster ratedecrease with input decreasing at a faster rate



decrease with input decreasing at a faster ratedecrease with input decreasing at a faster rate

�� Assumption that more input would cause Assumption that more input would cause

output to increase at the same rateoutput to increase at the same rate

�� certain limits to the amount of output may not be certain limits to the amount of output may not be

consideredconsidered

�� output producedoutput produced is emphasized, not is emphasized, not output soldoutput sold; ;

increased inventoriesincreased inventories

�� StrategyStrategy�� Provides direction for achieving a missionProvides direction for achieving a mission

�� Five Steps for Strategy FormulationFive Steps for Strategy FormulationDefining a primary taskDefining a primary task

Strategy and OperationsStrategy and Operations


�� Defining a primary taskDefining a primary task�� What is the firm in the business of doing?What is the firm in the business of doing?

�� Assessing core competenciesAssessing core competencies�� What does the firm do better than anyone else?What does the firm do better than anyone else?

�� Determining order winners and order qualifiersDetermining order winners and order qualifiers�� What qualifies an item to be considered for purchase?What qualifies an item to be considered for purchase?

�� What wins the order? What wins the order?

�� Positioning the firmPositioning the firm�� How will the firm compete?How will the firm compete?

�� Deploying the strategyDeploying the strategy

Strategic PlanningStrategic Planning

Mission

and Vision


Corporate

Strategy

Operations

Strategy

Marketing

Strategy

Financial

Strategy

Order WinnersOrder Winnersand Order Qualifiersand Order Qualifiers


Source:Source:Adapted from Nigel Slack, Stuart Chambers, Robert Johnston, and Alan Adapted from Nigel Slack, Stuart Chambers, Robert Johnston, and Alan Betts, Betts, Operations and Process ManagementOperations and Process Management, Prentice Hall, 2006, p. 47, Prentice Hall, 2006, p. 47

Positioning the FirmPositioning the Firm

�� CostCost

�� SpeedSpeed

�� QualityQuality


�� QualityQuality

�� FlexibilityFlexibility

Positioning the Firm: Positioning the Firm: CostCost

�� Waste eliminationWaste elimination�� relentlessly pursuing the removal of all wasterelentlessly pursuing the removal of all waste

�� Examination of cost structureExamination of cost structure


�� Examination of cost structureExamination of cost structure�� looking at the entire cost structure for looking at the entire cost structure for

reduction potentialreduction potential

�� Lean productionLean production�� providing low costs through disciplined providing low costs through disciplined

operationsoperations

Positioning the Firm:Positioning the Firm:SpeedSpeed

�� fast moves, fast adaptations, tight linkagesfast moves, fast adaptations, tight linkages

�� InternetInternet�� conditioned customers to expect immediate responsesconditioned customers to expect immediate responses

�� Service organizationsService organizations


�� Service organizationsService organizations�� always competed on speed (McDonald’s, LensCrafters, and always competed on speed (McDonald’s, LensCrafters, and

Federal Express)Federal Express)

�� ManufacturersManufacturers�� timetime--based competition: buildbased competition: build--toto--order production and order production and

efficient supply chainsefficient supply chains

�� Fashion industryFashion industry�� twotwo--week designweek design--toto--rack lead time of Spanish retailer, Zararack lead time of Spanish retailer, Zara

Positioning the Firm: Positioning the Firm: QualityQuality

�� Minimizing defect rates or conforming to Minimizing defect rates or conforming to design specifications; please the customerdesign specifications; please the customer

�� RitzRitz--Carlton Carlton -- one customer at a timeone customer at a time


�� RitzRitz--Carlton Carlton -- one customer at a timeone customer at a time�� Service system is designed to “move heaven Service system is designed to “move heaven

and earth” to satisfy customerand earth” to satisfy customer

�� Every employee is empowered to satisfy a Every employee is empowered to satisfy a guest’s wish guest’s wish

�� Teams at all levels set objectives and devise Teams at all levels set objectives and devise quality action plansquality action plans

�� Each hotel has a quality leader Each hotel has a quality leader

Positioning the Firm:Positioning the Firm:FlexibilityFlexibility

�� ability to adjust to changes in product mix, ability to adjust to changes in product mix, production volume, or designproduction volume, or design

�� National Bicycle Industrial CompanyNational Bicycle Industrial Companyoffers 11,231,862 variationsoffers 11,231,862 variations


�� offers 11,231,862 variationsoffers 11,231,862 variations

�� delivers within two weeks at costs only 10% delivers within two weeks at costs only 10% above standard modelsabove standard models

�� mass customizationmass customization: the mass production of : the mass production of customized partscustomized parts

Policy DeploymentPolicy Deployment

�� Policy deploymentPolicy deployment

�� translates corporate strategy into measurable translates corporate strategy into measurable

objectivesobjectives


objectivesobjectives

�� HoshinsHoshins

�� action plans generated from the policy action plans generated from the policy

deployment processdeployment process

Policy DeploymentPolicy Deployment


Derivation of an Action Plan Using Policy DeploymentDerivation of an Action Plan Using Policy Deployment

Balanced ScorecardBalanced Scorecard

�� Balanced scorecardBalanced scorecard

�� measuring more than financial performancemeasuring more than financial performance

�� financesfinances


�� financesfinances

�� customerscustomers

�� processesprocesses

�� learning and growinglearning and growing

�� Key performance indicatorsKey performance indicators

�� a set of measures that help managers evaluate a set of measures that help managers evaluate

performance in critical areasperformance in critical areas


BalancedBalanced Scorecard WorksheetScorecard Worksheet




Radar ChartRadar Chart DashboardDashboard

Operations StrategyOperations Strategy

ProductsProducts

ServicesServices ProcessProcess

andand

TechnologyTechnology


CapacityCapacity

HumanHuman

ResourcesResources QualityQuality

FacilitiesFacilities SourcingSourcing OperatingOperating

SystemsSystems

Organization of This Text:Organization of This Text:Part I Part I –– Operations ManagementOperations Management

�� Intro. to Operations andIntro. to Operations and

Supply Chain Management:Supply Chain Management: Chapter 1Chapter 1

�� Quality Management:Quality Management: Chapter 2Chapter 2

�� Statistical Quality Control:Statistical Quality Control: Chapter 3Chapter 3


�� Statistical Quality Control:Statistical Quality Control: Chapter 3Chapter 3

�� Product Design:Product Design: Chapter 4Chapter 4

�� Service Design:Service Design: Chapter 5Chapter 5

�� Processes and Technology:Processes and Technology: Chapter 6Chapter 6

�� Facilities:Facilities: Chapter 7Chapter 7

�� Human Resources:Human Resources: Chapter 8Chapter 8

�� Project Management:Project Management: Chapter 9Chapter 9

�� Supply ChainSupply Chain

Strategy and Design:Strategy and Design: Chapter 10Chapter 10

�� Global Supply ChainGlobal Supply Chain

Procurement and Distribution:Procurement and Distribution: Chapter 11Chapter 11

Organization of This Text:Organization of This Text:Part II Part II –– Supply Chain ManagementSupply Chain Management


Procurement and Distribution:Procurement and Distribution: Chapter 11Chapter 11

�� Forecasting:Forecasting: Chapter 12Chapter 12

�� Inventory Management:Inventory Management: Chapter 13Chapter 13

�� Sales andSales and

Operations Planning:Operations Planning: Chapter 14Chapter 14

�� Resource Planning:Resource Planning: Chapter 15Chapter 15

�� Lean Systems:Lean Systems: Chapter 16Chapter 16

�� Scheduling:Scheduling: Chapter 17Chapter 17

Learning Objectives of Learning Objectives of this Coursethis Course

�� Gain an appreciation of strategic importance Gain an appreciation of strategic importance of operations and supply chain management of operations and supply chain management in a global business environmentin a global business environment

�� Understand how operations relates to other Understand how operations relates to other


�� Understand how operations relates to other Understand how operations relates to other business functionsbusiness functions

�� Develop a working knowledge of concepts Develop a working knowledge of concepts and methods related to designing and and methods related to designing and managing operations and supply chainsmanaging operations and supply chains

�� Develop a skill set for quality and process Develop a skill set for quality and process improvementimprovement

Copyright 2009 John Wiley & Sons, Inc.Copyright 2009 John Wiley & Sons, Inc.

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introduction to operations and supply chain management · 2018. 1. 30. · lecture outline what...

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